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A perfect storm may be headed our way, and we're not talking about Hurricane Sandy. Going down to the wire of the marathon election campaign, investors (and regular folks) were trying to figure out not only who would be getting a new, four-year lease on the White House, starting next Jan. 20, but what it would mean for the fiscal cliff at the turn of the year.

As the Northeast was bracing for what was being billed as the region's worst storm in a century, preparations were being made, in case Sandy does her (or is it his?) worst and knocks out power and transportation. In contrast, there was a strange equanimity among analysts and money managers that the effects of the end of the Bush-era tax cuts and mandatory spending cuts would be so bad that they wouldn't happen, at least on schedule.

Even the dysfunctional crew in D.C. won't let the economy go over the cliff and into the abyss of a self-inflicted recession, goes the conventional wisdom, owing not to their great wisdom and statesmanship, but to their finely honed instinct for self-preservation. Indeed, some have likened the hand-wringing over the fiscal cliff to the hysteria over Y2K; computers supposedly were going to crash around the globe when the clock hit midnight on Jan. 1, 2000. It didn't happen, of course, but that was largely because of the warnings that came years in advance and the massive boom in technology spending during the dot-com bubble that put antiquated equipment out to pasture.

And so the presumption is that bad things also won't be allowed to happen this time. President Obama, after all, flatly stated in Monday's third and final debate with GOP challenger Mitt Romney that no "sequestration" would affect the military. Earlier in the day, in a luncheon talk to the packed Barron's Art of Successful Investing conference in New York, that view was shared by veteran Washington watcher Greg Valliere, chief political strategist of the Potomac Research Group. Despite never having seen Congress so "dysfunctional" and intent on producing sound bites instead of sound policy, Greg thought other cuts would be made to offset any sequestration impact on defense.

But he doesn't expect a continuation of the expiring payroll-tax cut. The "big one" is the extension of the Bush tax cuts, which, if rescinded, not only would raise the top bracket to 39.6% from 35%, but also would hit investment returns. The 15% top capital-gains rate would rise to 20% from 15%, while dividends, currently taxed at 15%, would revert to being taxed as ordinary income. In addition, Greg reminded his audience, that doesn't include the 3.8% Medicare tax applied to investment income for couples making over $250,000, to help fund Obamacare.

Depending on what is extended or enacted, Greg says that some 3%, 4%, or 5% could be sliced off annual growth in gross domestic product, citing the estimates of Mark Zandi of Moody's Economy.com. "You don't need a degree from MIT to see what that would mean to an economy growing at 2% -- a severe recession," says Greg.

On the expectation that Obama ekes out re-election, Valliere thinks Washington probably will emulate Europe and "kick the can" down the road a few months, to March 31. Don't look for a grand bargain on the order of $4 trillion in deficit cuts or something along the lines of the Simpson-Bowles plan, which he notes garnered all of 38 votes out of 435 in the House of Representatives. But perhaps something relatively benign could be hammered out, he adds.

The alternative would be too awful to contemplate, which, one supposes, is why the market and politicians assume it won't happen. According to Lombard Street Research, going over the fiscal cliff would slice 3.4% from gross domestic product -- $280 billion from expiring Bush tax cuts (1.9% of GDP), and the end of the payroll-tax holiday (0.8%), plus Obama's tax cuts (0.7%). Add in 1.8% from spending measures, and you get a potentially disastrous 5.2% reduction in GDP, which is why LSR doesn't expect anything like this to occur.

How it may turn out depends heavily on what happens a week from Tuesday, according to LSR. Most likely is an Obama win, with Republicans holding the House and Democrats holding the Senate, the London-based research firm says, in which case it sees extension of the Bush tax cuts, even for the rich, but with other tax hikes hitting. Spending cuts would be about half those that would come under sequestration. Bottom line: 2.25% or so sliced from GDP.

In the event of a GOP sweep of the White House and both houses of Congress, LSR expects only the payroll-tax cut to end, while spending cuts would be deeper, also totaling some 2.25% of GDP. A sweep by the Democrats would mean the end to Bush tax cuts and the most negative scenario for growth, off some 2.75%. Finally, Lombard Street Research thinks, a Romney win with the GOP holding the House and the Democrats keeping control of the Senate or the scenario of Obama's re-election and Republicans controlling the House or the Senate both would result in a 2.3% cut in GDP. The former would lean more to spending cuts, while the latter would result from a bipartisan agreement on taxes and spending.

Meanwhile, analysts at BCA Research think the electoral-college odds favor Obama, but add that Romney has a 40% chance of winning, depending on how the "electoral dice roll." But BCA also lists some potential surprises, notably Obama winning the electoral vote, despite Romney winning the popular tally. Other possibilities include a tie in the electoral college, which would throw the election to the GOP-controlled House. Or Libertarian candidate Gary Johnson playing spoiler, as Ralph Nader did in 2000, siphoning support from Romney in Colorado and New Hampshire to give those states' 13 electoral votes to Obama. Any of the outlier outcomes would weaken the next president and heighten policy uncertainty, as would an Obama win and a strong showing by Tea Party candidates in the Senate and House.

"Bottom Line: Romney is better for equities, Obama, for Treasuries, and a contentious result on Nov. 6 would be negative for both stocks and the real economy," BCA concludes.

The closeness of the race also means that the October employment report, due Friday morning, might tip the balance. "That's a rather disturbing thought," according to LSR. "It's bad enough that this heavily revised, lagging indicator already has power to wreck global markets once a month, without it being used to decide the future of the world. There must a better alternative for determining who becomes president. A game of basketball between the main contenders? A cookery competition judged by Mario Batali? An X-factor style sing-off? A Supreme Court vote…oops…already tried that!"

THE SEPTEMBER JOBS NUMBERS released early this month elicited howls (and tweets) from suspicious types after a huge, unexpected 0.3-percentage point drop in the unemployment rate, to 7.8%. So the October number, coming out just a few days before the election, is sure to be scrutinized even more closely for, shall we say, quirks.

The consensus guess is for a 0.1-percentage-point retracement in the headline-grabbing jobless rate for October. The more reliable payroll number, derived from a separate survey of business, is forecast to show another tepid gain on the order of 120,000, not meaningfully different from September's 114,000 increase.

Even though there was no evidence of finagling in the jobs numbers, other data raised the eyebrows of some sharp-eyed observers, such as Michael T. Lewis, who heads Chicago consultancy Free Market Inc. The advance estimate of third-quarter real GDP showed annualized growth of 2%, the high end of the range of estimates. "However, one-third of the increase came from a surge in defense spending which, of course, has nothing to do with the imminent presidential election," Mike writes in italics, in case you didn't get his point.

The 13% hike in defense outlays, the biggest since the Iraq war began winding down, will surely be followed by a steep drop in the current quarter -- after the election.

Sluggish GDP growth also translates into weak profits and returns on investment by corporations, according to David P. Goldman, head of Macrostrategy and former head of fixed-income research at Bank of America.